Sunday 27 August 2017

The 3 Biggest Mistakes Ex-Military Service Personnel Make with their Money

In a perfect world, financial planning would be a breeze no matter what stage of life we are in. The hard truth is that for most, avoiding money pitfalls is easier said than done. Here are the 3 biggest mistakes ex-military personnel make - and how to avoid them!

Mistake 1: Failing to Take an Active Role

Whilst you’re in the military, there are fewer active money decisions that need to be made. Pension contributions and life insurance, for example, are taken care of for you, without much if any input needed by you.

But once you’re in the civvie street, you have to take a more active role in arranging your finances.

Quite a bit more decision-making is necessary after military service, especially when it comes to your workplace benefits package. For example, many employer pension plans will match your contributions up to a limit, but often the employer’s default option is not the maximum available.

Tip - make sure to contact your employer’s HR or Payroll department and find out what the maximum matched contribution is. 

A second area is life insurance. Many larger employers either provide life insurance as a core part of their benefits package or it is available as an add-on. But the problem is that most employees don’t sign up for the benefit, or don’t pay the very small premium to get comprehensive life insurance.

Tip - contact your employer and find out if they provide employees with a ‘Death in Service’ benefit and what the cost is to increase it, if you need to.

Mistake 2: Avoiding Basic Financial Skills

Countless life skills are developed during military service, but financial management isn’t always one. Part of that is because some of the big ticket items are provided for you, like your housing, food, and travel costs. There simply isn’t the time or need to create a personal finance budget or dive into money management strategies.

In the civvie street, that just isn’t the case!

Instead of avoiding these basic financial skills altogether, ex-military can do themselves a favour by getting to know how these tools work to their benefit. For instance, a budgeting app or an excel spreadsheet can be your best friend in getting a handle on your money each month.

Keep it simple by dividing expenses into basics, leisure, luxury, and milestone categories.  Be clear about the income you have at your disposal each month. From there, you can determine what’s left to spend and save.

Tip - download a budgeting app to hold you accountable and keep you on track, top recommendation: YouNeedABudget.

Mistake 3: Not Having a Plan

Planning, strategy, implementation. This is the bread and butter of the military, but it’s amazing how often we forget all the best laid plans when we are taken out of the environment. It’s not uncommon for ex-military personnel I meet to tell me about the change of structure and organisation in their personal lives that they had in their military lives.

Creating a plan with a trusted partner not only gives you an understanding of what where you are, and where you’re heading, but it provides you with detailed next steps and contingency plan. Without a plan, there is no real way to know if the steps you are taking are helpful or harmful to your bigger financial picture.

Tip - take a piece of paper, and write down what you want to achieve, personally and professionally, within the next 3 years. Then work out the steps to achieve them.

The old saying, "those who fail to plan, plan to fail", is painfully true when it comes to your financial life.

Transitioning out of military service does not mean you are doomed to face one of these common financial mistakes, but without taking active steps, you are likely to face these challenges. Commit to doing one thing today to sidestep these common pitfalls, no matter how big or small.

As an exclusive offer for friends, family, and colleagues of our valued clients, we provide a Second Opinion Service to help the ones you care about understand their financial situations better. If you know someone who would benefit from this second opinion service, feel free to pass this information on to them directly.

Tuesday 22 August 2017

Are you being overcharged? Fancy saving £332 per month?

When initially taking a mortgage, many homeowners choose to take a fixed rate or tracker rate that lasts for between 2-5 years.  When these rates end, in most cases the borrowing will transfer onto the lenders ‘Standard Variable Rate’ (SVR) and for most lenders, this means the rate charged will be between 3.74% to 5.74%.  
Dave Rees, our mortgage expert, reveals how you could save up to £332 per month on your mortgage.
Typically, the rate for Standard Variable Rates are higher than those that are available if taking a new mortgage, so for most people a significant saving can be made by shopping around for an alternative.  For example, a mortgage of £200,000 with 20 years remaining would cost £1,291pcm on a typical SVR of 4.74%.  However, assuming there was equity of at least 25%, a 2 year fixed rate could be obtained at 1.44% - this would cut monthly repayments to £959pcm(*).

Alternatively, a 5 year fixed rate could be obtained for 1.69% with a £749 fee that would cut payments to £982pcm (*)  A new lender will require the property value to be confirmed and a solicitor to be involved but the lenders offering these products (and many others) would pay these costs on behalf of the applicants.

Consideration should also be given to taking a new product with the current lender as in most cases, lenders will offer borrowers competitive options as an alternative to switching to the SVR and if no additional borrowing is required, this is usually a quick/simple process with little/no additional underwriting involved.

Ideally, these options should be considered 2-3 months before the current product ends, to help ensure if changing, that the new product can start as soon as the current product ends.  For advice and guidance on product options, please contact Dave Rees on 01225 775923 (Option 2) or 07932 469797 or email at dave@davereesmortgages.co.uk

(* Products quoted correct as of August 2017)

 

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